Employees vs. Contractors

In California, distinguishing between employees and independent contractors is crucial for small business owners. Misclassifying workers can result in severe legal and financial consequences, including fines, penalties, and costly lawsuits. Understanding the legal difference and the proper classification from the start ensures your business remains compliant with state and federal laws.

Why This Distinction Is So Important:

• Compliance with California Law: Under the ABC Test, established by Dynamex Operations West, Inc. v. Superior Court (2018), workers are presumed to be employees unless the employer can demonstrate that they meet three specific criteria. Misclassification can lead to tax liabilities, wage and hour violations, and exposure to lawsuits.

• Costly Consequences of Misclassification: If a worker is misclassified as an independent contractor when they should be an employee, your business may face back wages, penalties for unpaid benefits, and even potential lawsuits for unpaid overtime or missed rest breaks.

• Protect Your Business from Legal Risk: Ensuring your workers are correctly classified helps safeguard your business from legal risks, protects your brand reputation, and promotes a positive work environment.

Getting this right from the outset will help your business avoid unnecessary pitfalls and focus on growth with peace of mind.

Don’t navigate this alone. Contact us today.